Realizing sustainable development depends on “greening finance”—that is, ensuring that the financial institutions charged with allocating available financial assets take environmental and social factors into account when allocating credit, making investments and providing other financial services such as insurance. Transforming from a resource and pollution-intensive economy to a green economy is now a strategic priority for China. Success depends on the development of green industries and the transformation and reduced importance of many traditional industries. Key priorities include clean energy, industrial energy conservation, building energy conservation, transport energy conservation, improvement of energy efficiency and environmental pollution control.
Greening finance is a growing focus for the Chinese government through the promotion of green credit, green securities and green insurance. However, despite significant progress, some constraints must still be overcome: first, perverse price signals resulting from absent or inappropriate policies; second, unwillingness of short-term focused investors to finance green development projects that often require higher upfront investment and give slower returns; and third, a lack of clear definitions and frameworks, which results in
inadequate enabling policies, regulations and standards. Furthermore, progress is constrained by divergent interests and approaches between central and local government, as well as between government and market institutions. This book proposes a framework for actions covering five key areas that, if adopted by the Chinese government, would promote the systematic development of green finance.